PETALING JAYA: The imposition of the 5% Real Property Gains Tax (RPGT) is pouring cold water on plans by some people to acquire property next year.
A poll ran by theedgeproperty.com over the past two weeks following the announcement of the RPGT in Budget 2010 found that nearly three quarter of the poll participants voted that the RPGT discouraged them from buying property.
The poll question was: Will the imposition of a 5% RPGT from 2010 discourage you from buying a property? Yes/No
The poll began on Oct 26 and as of Nov 6, 5pm there were 285 votes of which 72.6% were in the affirmative.
As if echoing this sentiment among property buyers, some tax experts are anticipating a dampened property market with the RPGT imposition from Jan 1, 2010.
“It would likely dampen the market for a while as people would hold back on acquisition transactions,” said PricewaterhouseCoopers Taxation Services Sdn Bhd’s executive director, Ng Say Guat in an earlier article on theedgeproperty.com.
“…I foresee people becoming more careful when it comes to purchasing and selling a property, thus slowing down the momentum we are just starting to gain which is detrimental to our market,” said KGV-Lambert Smith Hampton executive director Samuel Tan.
However, properties older than five years may see heavier transactions in the months leading up to Jan 1, 2010.
An unnamed tax consultant is of the opinion that medium- to long- term property investors and companies holding their properties for more than five years will be trying to sell them off now before Jan 1.
This is because the new system will disadvantage individuals and holding companies that have held on to their properties for longer than five years and have seen an appreciation since.
Previously, the RPGT did not apply to property transacted after five years of ownership.
However, what riles the industry was not so much the amount taxed as the effect it will have on the local property market as the global economy is still vulnerable, as well as how it is symptomatic of a flip-flop in government policy implementation.
The Edge’s City & Country, haven and theedgeproperty.com editor Au Foong Yee had this to say in her latest commentary: “The 5% RPGT is in danger of being viewed as yet another of Malaysia’s once infamous flip flops in real estate-related guidelines and regulations.
“If we are indeed serious in attracting property foreign direct investments (FDIs), we must walk the talk. At all times,” she wrote.
“The property players were consistent in their frustrations over another change in policy after having spent the last two years hammering home the point that Malaysia does not impose RPGT through their marketing efforts on the international market,” Hall Chadwick Asia chairman Kumar Tharmalingam wrote in City & Country’s My Space column. City & Country is the property pullout of The Edge.However, not all reacted negatively to the news, considering it as a means to cool the market and allow genuine investors to study the market properly before making purchases. Nonetheless, the general consensus appears to be that the RPGT imposition will somewhat curb buyers’ appetite for property, at least in the short term.